As Its Investors Reap Returns, venBio Aims for a Bigger Second Fund

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putting the deal together, Goodman said. An undisclosed cut of the sale goes back to Pfizer, but venBio stands to profit handsomely. (The migraine treatment was one of the monoclonal antibody products Pfizer acquired when it bought Rinat Neuroscience in 2006; Goodman knew about it from his two years at the helm of Pfizer’s biotech center in San Francisco. When Pfizer put the antibody up for auction in 2012, Goodman won the bid.)

“This [Labrys] deal alone won’t return our entire fund, but it could return a large percentage of it,” Goodman said. “With Aragon on top of that, it puts us in positive territory.”

To be specific, venBio’s cut of the Labrys and Aragon upfront payments is more than the fund has drawn down from its investors. Add the near-term milestones from each deal, said Goodman, and it clears the entire $180 million fund, “plus more.”

Around the time venBio closed its first fund, von Emster told a conference crowd that venBio was a creature of its time. “Our model wouldn’t have worked 10 years ago, and it might not work in 10 years,” he said.

The partners are ready to put that to the test. Goodman said venBio is considering a second fund with the same philosophy that “we won’t start companies assuming they’ll have IPOs. We’re assuming M&A.” He estimated the fundraising goal this time would be $250 million to $300 million. “Instead of putting $10 million to $20 million into a given company, we could perhaps go as high as $30 million to $40 million,” Goodman said.

Other than Solstice, VenBio’s remaining portfolio companies hew to its preference for clinical-stage investments with some risk removed. When Aragon was sold, J&J agreed to spin out a second asset, a breast cancer treatment, which attracted a $30 million Series A and became Seragon Pharmaceuticals.

Heart Metabolics, which is domiciled in Ireland, received $20 million in April to run a Phase III trial in hypertrophic cardiomyopathy with an old angina drug. Aurinia Pharmaceuticals was spun out of Canadian firm Aspreva Pharmaceuticals last year to test an immunosuppressant, voclosporin, as a lupus nephritis treatment. Voclosporin had failed to win regulatory approval in Europe for treatment of the eye condition uveitis.

VenBio has taken one hit to date. In 2012 it helped recapitalize Cytos Biotechnology, a struggling public Swiss firm, and aimed to move its Phase 2 asthma treatment forward. Cytos said last month it would wind down operations.

Alex Lash is Xconomy's National Biotech Editor. He is based in San Francisco. Follow @alexlash